Item 1.
|
Financial Statements.
|
The accompanying unaudited financial
statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of
the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements
and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, filed with the SEC on March
13, 2017. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation
of financial position and the results of operations for the periods presented have been reflected herein. The results of operations
for the periods presented are not necessarily indicative of the results to be expected for the full year.
TABLE OF CONTENTS
|
|
PAGE
|
|
|
|
Balance Sheets as of March 31, 2017 (unaudited) and June 30, 2016
|
|
6
|
Statements of Operations for the three and nine month periods ended March 31, 2017 and 2016 (unaudited)
|
|
7
|
Statements of Cash Flows for the nine month periods ended March 31, 2017 and 2016 (unaudited)
|
|
8
|
Notes to the Financial Statements (unaudited)
|
|
9
|
ENGAGE MOBILITY, INC.
BALANCE SHEETS
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities and Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
46,294
|
|
|
$
|
33,309
|
|
Note payable
|
|
|
5,000
|
|
|
|
5,000
|
|
Due to related party
|
|
|
696,483
|
|
|
|
658,759
|
|
Total Liabilities
|
|
|
747,777
|
|
|
|
697,068
|
|
Stockholders’ Deficiency:
|
|
|
|
|
|
|
|
|
Common Stock (No par value, 100,000,000 shares authorized, 23,082,567 shares issued and outstanding at March 31, 2017 and June 30, 2016.)
|
|
|
2,891,995
|
|
|
|
2,891,995
|
|
Paid in capital
|
|
|
3,091,072
|
|
|
|
3,091,072
|
|
Accumulated deficit
|
|
|
(6,730,844
|
)
|
|
|
(6,680,135
|
)
|
Total Stockholders’ Deficiency
|
|
|
(747,777
|
)
|
|
|
(697,068
|
)
|
Total Liabilities and Stockholders’ Deficiency
|
|
$
|
-
|
|
|
$
|
-
|
|
See accompanying notes to financial
statements.
ENGAGE MOBILITY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the Three Months Ended March 31,
|
|
|
For the Nine Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
48,309
|
|
|
$
|
1,200
|
|
|
$
|
50,709
|
|
|
$
|
57,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(48,309
|
)
|
|
|
(1,200
|
)
|
|
|
(50,709
|
)
|
|
|
(57,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss from intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,462
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total other expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes
|
|
|
(48,309
|
)
|
|
|
(1,200
|
)
|
|
|
(50,709
|
)
|
|
|
(75,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(48,309
|
)
|
|
$
|
(1,200
|
)
|
|
$
|
(50,709
|
)
|
|
$
|
(75,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding, basic and diluted
|
|
|
23,082,567
|
|
|
|
23,082,567
|
|
|
|
23,082,567
|
|
|
|
23,082,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
a
|
|
|
$
|
a
|
|
|
$
|
a
|
|
|
$
|
a
|
|
a = Less than ($0.01) per share
See accompanying notes to financial
statements.
ENGAGE MOBILITY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Nine Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
|
$
|
(50,709
|
)
|
|
$
|
(75,713
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
-
|
|
|
|
8,167
|
|
Impairment loss from intangible assets
|
|
|
-
|
|
|
|
18,462
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in accrued expenses
|
|
|
12,985
|
|
|
|
49,084
|
|
Net cash used in operating activities
|
|
|
(37,724
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Loan from related party
|
|
|
37,724
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
37,724
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
-
|
|
|
|
-
|
|
Cash, beginning of period
|
|
|
-
|
|
|
|
-
|
|
Cash, end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest expense paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities
|
|
|
|
|
|
|
|
|
Payments of accrued expenses assumed by stockholder
|
|
$
|
-
|
|
|
$
|
96,663
|
|
Payables to related parties assumed by stockholder
|
|
$
|
658,759
|
|
|
$
|
-
|
|
See accompanying notes financial
statements.
ENGAGE MOBILITY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 1—ORGANIZATION, BUSINESS
AND OPERATIONS
Engage Mobility, Inc. (the “Company”)
was incorporated on December 28, 2011 under the laws of the State of Florida as MarketKast Incorporated. On March 22, 2013, the
Company changed its name to Engage Mobility, Inc. Since formation, the Company functioned as a provider of mobile marketing services,
online and mobile video production, distribution, syndication and marketing services for business owners.
On April 9, 2015, a Stock Purchase
Agreement (“Stock Purchase Agreement”) was entered into by and among Engage International Technology Co. Ltd. (“Engage
International”), James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”) (Byrd and Hackett,
collectively, the “Sellers”), who were the principal stockholders of the Company, pursuant to which Engage International
acquired from the Sellers a total of 16,462,505 shares of the Company’s Common Stock, representing 75.61% of the Company’s
issued and outstanding shares on that date. Pursuant to the Stock Purchase Agreement, a change in control of the Company occurred.
The Company was not able to raise
sufficient capital to execute its original business plan and, as of February 15, 2017, has decided to cease its plan of operation
as a mobile technology provider. As a result, the Company is now a “shell company” (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going forward, the Company intends
to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business
presents an opportunity for the Company’s stockholders.
NOTE 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements
are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The unaudited
interim financial statements of the Company as of March 31, 2017 and for the nine months ended March 31, 2017 and 2016, have been
prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations
of the SEC which apply to interim financial statements.
Accordingly,
they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United
States of America for annual financial statements. The interim financial information should be read in conjunction with the financial
statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2016,
previously filed with the SEC. In the opinion of management, the interim information contains all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations
for the nine months ended March 31, 2017 are not necessarily indicative of the results to be expected for future quarters or for
the year ending June 30, 2017.
Use of Estimates
In preparing financial statements
in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
ENGAGE MOBILITY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly
liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2017 and
June 30, 2016, the Company had no cash and cash equivalents.
Revenue Recognition
In general, the Company records
revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably assured. The following reflects specific criteria
for the various revenues streams of the Company:
Revenue for services is recognized
at the time the services are rendered.
Where the Company has entered into
a revenue sharing agreement with a third party, the Company records their proportionate share of the revenue.
The Company’s revenues have
principally been from video distribution and advertising fees via the platform. However, since July 1, 2015 until the date of this
report, the Company did not report any revenues.
Accounts Receivable and Allowance
for Doubtful Accounts
Accounts receivable are reported
at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts
based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes
off accounts receivable against the allowance when a balance is determined to be uncollectible.
Property, Plant and Equipment
Property, plant and equipment are
recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, including capitalized
interest during the construction period, and any expenditures that substantially increase the assets value or extends the useful
life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated
over the periods benefited. Maintenance and repairs are generally expensed as incurred.
Intangible Assets and Long-lived
Assets
The Company reviews for impairment
its long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected
to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company’s finite lived
intangibles, comprised of patents, a mobile platform, and web and domain assets, are being amortized over a period of three years.
During the nine months ended March 31, 2017 and 2016, the Company reported an impairment loss of $0 and $18,462, respectively.
The impairment loss during the nine months ended March 31, 2016 was due to the cessation
of the Company’s plan of operation as a mobile technology provider
.
ENGAGE MOBILITY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The Company’s short-term financial
instruments consist of cash, accounts receivable, and accrued expenses, and other current liabilities. The carrying amounts of
these financial instruments approximate fair value because of their short-term maturities. The Company does not hold or issue financial
instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments. The carrying
value of the Company’s long-term debt approximates fair value based on the terms and conditions at which the Company could
obtain similar financing.
Income Taxes
In accordance with the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”),
“Income Taxes”
(“ASC 740”), deferred tax assets and liabilities are computed based upon the difference between the financial statement
and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability
is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability
each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets
will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than
not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period
of change. The Company has recorded a valuation allowance against its deferred tax assets based on the history of losses incurred.
ASC 740 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under
ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets
and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties
associated with tax positions. As of March 31, 2017 and June 30, 2016, the Company does not have a liability for any unrecognized
tax benefits.
All tax periods from inception remain
open to examination by taxing authorities.
Stock-based Compensation
The Company records the cost resulting
from all share-based transactions in the financial statements. The Company applies a fair-value-based measurement in accounting
for share-based payment transactions with employees and when the Company acquires goods or services from non-employees in share-based
payment transactions.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Basic and Diluted Loss per
Share
The Company reports loss per share
in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using
the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the
assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained
were assumed to be used to purchase Common Stock at the average market price during the period. There were no dilutive instruments
outstanding during the nine months ended March 31, 2017 and the year ended June 30, 2016. However, if present, a separate computation
of diluted loss per share would not have been presented, as these common stock equivalents would have been anti-dilutive due to
the Company’s net loss.
Recently Issued Accounting
Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a
material impact on the consolidated financial statements upon adoption.
NOTE 3—GOING CONCERN
The accompanying unaudited condensed
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity
of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the accompanying
unaudited condensed financial statements, the Company has an accumulated deficit of approximately $6,731,000 and a working capital
deficit of approximately $748,000 at March 31, 2017. In addition, the Company continues to generate operating losses and negative
cash flows from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The
ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and
implement its business plan, which is now to seek, investigate and, if such investigation warrants, engage in a business combination
with a private entity whose business presents an opportunity for our stockholders. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a going concern. Management intends to provide the
Company with additional loans as needed and is seeking a merger target to implement its strategic plans. Management feels these
actions provide the opportunity for the Company to continue as a going concern.
NOTE 4—PROPERTY, PLANT
AND EQUIPMENT
The Company currently does not have
any property, plant or equipment. During the year ended June 30, 2015, the Company disposed of all its property and equipment and
recognized a loss on disposal of $3,909. Depreciation expense charged to operations for both the nine months ended March 31, 2017
and 2016 was $0.
ENGAGE MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 5—INTANGIBLE ASSETS
Intangible assets consisted of the
following:
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Mobile platform
|
|
$
|
98,000
|
|
|
$
|
98,000
|
|
Patents
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
|
99,000
|
|
|
|
99,000
|
|
Less:
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
(80,538
|
)
|
|
|
(80,538
|
)
|
Impairment reserve
|
|
|
(18,462
|
)
|
|
|
(18,462
|
)
|
Intangible assets, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Amortization expense charged to
operations for the nine months ended March 31, 2017 and 2016 was $0 and $8,167, respectively. During the year ended June 30, 2016,
the Company reported an impairment loss of $18,462 over its intangible assets. The impairment loss was due to the cessation of
the Company’s plan of operation as a mobile technology provider, and corresponding write down of the Company’s intangible
assets.
NOTE 6—DUE TO RELATED PARTY
Parties, which can be a corporation
or individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise
significant influence over the other party in making financial and operating decisions. Companies are also considered to be related
if they are subject to common control or common significant influence.
The Company received advances from
the following related parties, under common control, to supplement the Company’s working capital.
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Shenzhen Engage Mobile Technology Co., Ltd. (“Engage Technology”)
|
|
$
|
-
|
|
|
$
|
470,000
|
|
Shenzhen Datang Engage Telecom Co., Ltd. (“Engage Telecom”)
|
|
|
-
|
|
|
|
188,759
|
|
Hua Zhang
|
|
|
696,483
|
|
|
|
-
|
|
|
|
$
|
696,483
|
|
|
$
|
658,759
|
|
Shenzhen Engage Mobile Technology
Co., Limited became a related party after Engage International Technology Co., Ltd. purchased 75.61% of the Company’s Common
Stock from two stockholders of the Company on April 9, 2015. The advance is unsecured, payable on demand and non-interest bearing.
During the year ended June 30, 2016, the Company received $96,663 in advances from Engage Telecom. As of June 30, 2016, the balance
of the advances from related parties was $658,759. During the nine month period ended March 31, 2017, the Company received an additional
$37,724 in advances from Mr. Hua Zhang, As of March 31, 2017, the balance of the advances was $696,483. On February 23, 2017, the
prior year payable balances of $658,759 in total to Engage Technology and Engage Telecom had been fully assumed by the Company’s
sole officer and director, Mr. Hua Zhang.
ENGAGE MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 7—COMMITMENTS AND
CONTINGENCY
From time to time, the Company may
be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that
would have a material effect on the Company’s financial position or results of operations.
NOTE 8—STOCKHOLDERS’
DEFICIT
Equity
During the nine months ended March
31, 2017, the Company did not issue any new shares of Common Stock to the stockholders.
Stock Options
During the year ended June 30, 2014,
two employees were granted an aggregate of 614,000 five-year options, which vested immediately as to 114,000 options and 125,000
options were scheduled to vest each year over the next four years. The options were exercisable at $2.50 per share for 114,000
options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000
options. These two employees left the Company in April 2015 and the remaining unvested options were cancelled. No stock based compensation
was recorded during the nine months ended March 31, 2017 and 2016 due to the cancellation of options in April 2015.
A summary of the status of the stock
options granted to employees and others as of March 31, 2017 is as follows:
|
|
Number of Shares
|
|
Options outstanding at June 30, 2016
|
|
|
207,750
|
|
Changes:
|
|
|
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
Options outstanding at March 31, 2017
|
|
|
207,750
|
|
|
|
|
|
|
Options exercisable at March 31, 2017
|
|
|
207,750
|
|
ENGAGE MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2017 AND 2016
(UNAUDITED)
NOTE 8—STOCKHOLDERS’
DEFICIT (CONTINUED)
Stock Warrants
Stock warrants outstanding at March
31, 2017 were as follows:
|
|
Number of Shares
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Warrants outstanding at June 30, 2016
|
|
|
525,000
|
|
|
|
0.53
|
|
Changes:
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(525,000
|
)
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
Warrants outstanding at March 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable at March 31, 2017
|
|
|
-
|
|
|
|
-
|
|
Date Issued
|
|
Expiration Date
|
|
Exercise Price
|
|
|
Number of Warrants
|
|
July 2013
|
|
July 2016
|
|
$
|
2.00
|
|
|
|
125,000
|
|
February 2014
|
|
February 2017
|
|
$
|
1.50
|
|
|
|
200,000
|
|
February 2014
|
|
February 2017
|
|
$
|
2.00
|
|
|
|
200,000
|
|
On April 9, 2015, in anticipation
of and in connection with the share purchase by Engage International, the holder of a warrant to purchase 1,000,000 shares of Common
Stock at an exercise price of $1.00, agreed to its cancellation for no consideration. During the nine months ended March 31, 2017,
the 525,000 warrants expired without exercise.
NOTE 9—SUBSEQUENT EVENTS
Management has evaluated all activity
and concluded that no other subsequent events occurred as of May 15, 2017 that would require recognition in the financial statements
or disclosure in the notes to the financial statements.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
This Management’s Discussion
and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with
a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other
factors that may affect our future results. The following discussion and analysis should be read in conjunction with: (i) the accompanying
unaudited condensed financial statements and notes thereto for the nine months ended March 31, 2017, (ii) the financial statements
and notes thereto for the year ended June 30, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) on March 13, 2017 and (iii) the discussion under the caption “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K. Aside from certain information
as of June 30, 2016 all amounts herein are unaudited. Unless the context otherwise indicates, references to “Engage Mobility,”
“we,” “our,” “us” and the “Company” refer to Engage Mobility, Inc.
Overview
We were incorporated, under the
name MarketKast, Inc., under the laws of the State of Florida on December 28, 2011, to serve as a provider of mobile marketing
services, online and mobile video production, distribution, syndication and marketing services for business owners. On March 22,
2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change our name from “MarketKast,
Incorporated” to “Engage Mobility, Inc.” The Amendment was effective as of March 22, 2013. In connection with
the name change, our trading symbol was changed from “MRKK” to “ENGA,” effective April 4, 2013.
On February 18, 2014, we entered
into a joint venture agreement (“Joint Venture Agreement”) with Xinhua Ruide (Beijing) Network Technology Co., Ltd.
(“Xinhua Ruide”) and Shenzhen Yingjia Mobile Technology Co., Ltd. (“Shenzhen Yingjia”) to establish a joint
venture, Datang Engage (China) Mobile Technology Co., Ltd. (“Datang Engage”) to develop and launch a Chinese version
of our mobile platform. We own 30% interest in the joint venture. The Chairman of the joint venture is Mr. Hua Zhang.
In April 2014, we completed development
of version 2.0 of our Mobile Engagement System, which included our new product immersion, a street view augmented reality platform
that allowed users to locate businesses in their geographical area who are on the Engage system. We filed a provisional patent
application seeking patent protection for version 2.0 of our Mobile Engagement System.
In May 2014, we commenced our marketing
and sales efforts for our new Mobile Engagement System, but only experienced nominal initial revenue.
On April 9, 2015, pursuant to a
Stock Purchase Agreement (the “Stock Purchase Agreement”), Engage International Technology Co. Ltd. (“Engage
International”) acquired from James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”), who
were the principal stockholders of the Company, a total of 16,462,505 shares of the Company’s Common Stock, representing
75.61% of the Company’s then issued and outstanding shares. As a result of the transaction, a change in control of the Company
occurred. Pursuant to the terms of the Stock Purchase Agreement, as a condition to the sale and transfer of the controlling stake
of the Company, the then directors and officers of the Company resigned simultaneously at the closing of the transaction. Accordingly,
Mr. Byrd ceased to be Chairman of the Board of Directors of the Company; and Mr. Hackett ceased to be President, Chief Executive
Officer, Chief Financial Officer, Secretary, Treasurer and Director of the Company; and Eric Fellows ceased to be the Chief Operating
Officer of the Company. At the same time, Mr. Hua Zhang was appointed as the sole director and Chairman of the Board of Directors,
as well as the Chief Executive Officer of the Company.
Through June 2015, our efforts were
primarily limited to business formation, strategic development, marketing, website and product development, negotiations with third
party sales and channel partners, and capital raising activities. However, the Company was not able to raise sufficient capital
to execute its original business plan and, on February 15, 2017, management decided to cease our plan of operation as a mobile
technology provider. In connection with this determination, the Company’s finite lived intangibles, comprised of patents,
a mobile platform, and web and domain assets, have been impaired, and the Company has reported an impairment loss of $18,462 during
the fiscal year ended June 30, 2016. As a result of the foregoing, the Company is a “shell company” (as such term is
defined in Rule 12b-2 under the Exchange Act).
Going forward, the Company intends
to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business
presents an opportunity for our stockholders.
Our principal business objective
for the next twelve (12) months and beyond such time will be to achieve long-term growth potential through a combination with a
business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific
business, industry or geographical location and, thus, may acquire any type of business. We believe the costs of investigating
and analyzing business combinations for the next twelve (12) months and beyond such time will be paid with money to be loaned to
or invested in us by related parties. During the next twelve (12) months, we also anticipate incurring costs related to filing
of the reports required under the Securities Exchange Act of 1934, as amended, and consummating an acquisition. We believe we will
be able to meet these costs through funds to be loaned by or invested in us by related parties. However, our related parties have
made no commitments written or oral, with respect to providing a source of liquidity in the form of cash advances, loans and/or
financial guarantees. During the year ended June 30, 2016, the Company received $96,663 in advances from Engage Telecom, a related
party. As of June 30, 2016, the balance of the advances from related parties was $658,759. During the nine month period ended March
31, 2017, the Company received an additional $37,724 in advances from Mr. Hua Zhang, As of March 31, 2017, the balance of the advances
was $696,483. As of March 31, 2017, the balance of the advances was $696,483. On February 23, 2017, the prior year payable balances
of $658,759 in total to Engage Technology and Engage Telecom had been fully assumed by the Company’s sole officer and director,
Mr. Hua Zhang.
We have negative working capital,
negative stockholders’ equity and have not earned any revenues from operations to date. These conditions raise substantial
doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability
to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable
operations.
Results of Operations
Comparison of the three months
ended March 31, 2017 and 2016
Revenues
Since inception, our activities
have been primarily limited to business formation, strategic development, marketing, website and product development, negotiations
with third party sales and channel partners, and capital raising activities. We have conducted minimal operations during the three
months ended March 31, 2017 and 2016, and have not generated any revenues for the three months ended March 31, 2017 and 2016.
Operating Expenses
During the three months ended March
31, 2017, we incurred general and administrative expenses of $48,309. During the same period of 2016, we incurred general and administrative
expenses of $1,200. These general and administrative expenses consist of professional fees and other miscellaneous items. The increase
in the 2017 period resulted primarily from an increase in expenses related to SEC compliance filing requirements.
Impairment loss from intangible assets
Impairment loss from intangible
assets was $0 for the three months ended March 31, 2017, as compared to $18,462 for the three months ended March 31, 2016. The
2016 impairment loss from intangible assets resulted from the impairment of our finite lived intangibles, comprised of patents,
a mobile platform, and web and domain assets, in connection with the cessation of our plan of operation as a mobile technology
provider.
Net Loss
We had no operations and reported
a net loss of $48,309 for the three months ended March 31, 2017, compared to a net loss of $1,200 for the three months ended March
31, 2016. The increase in our net loss in the 2017 period resulted primarily from an increase in expenses related to SEC compliance
filing requirements. Our auditor has expressed doubt as to whether we will be able to continue to operate as a “going concern”
due to the fact that the Company has incurred significant losses since inception and will need to raise capital to further its
operations.
Comparison of the nine months
ended March 31, 2017 and 2016
Revenues
Since inception, our activities
have been primarily limited to business formation, strategic development, marketing, website and product development, negotiations
with third party sales and channel partners, and capital raising activities. We have conducted minimal operations during the nine
months ended March 31, 2017 and 2016, and have not generated any revenues for the nine months ended March 31, 2017 and 2016.
Operating Expenses
During the nine months ended March
31, 2017, we incurred general and administrative expenses of $50,709. During the same period of 2016, we incurred general and administrative
expenses of $57,251. These general and administrative expenses consist of professional fees and other miscellaneous items. The
decrease in expenses in the 2017 period resulted primarily from our limited operating activities, partially offset by our increased
expenditures in connection with SEC compliance filing requirements.
Impairment loss from intangible
assets
Impairment loss from intangible
assets was $0 for the nine months ended March 31, 2017, as compared to $18,462 for the nine months ended March 31, 2016. The 2016
impairment loss from intangible assets resulted from the impairment of our finite lived intangibles, comprised of patents, a mobile
platform, and web and domain assets in connection with the cessation of our plan of operation as a mobile technology provider.
Net Loss
We had no operations and reported
net loss of $50,709 for the nine months ended March 31, 2017, compared to a net loss of $75,713 for the nine months ended March
31, 2016. The decrease in our net loss in the 2017 period resulted primarily from our limited operating activities and a one-time
loss from our intangible assets, which was partially offset by our increased expenditures in connection with SEC compliance filing
requirements. Our auditor has expressed doubt as to whether we will be able to continue to operate as a “going concern”
due to the fact that the Company has incurred significant losses since inception and will need to raise capital to further its
operations.
Liquidity and Capital Resources
At March 31, 2017 and June 30, 2016,
we had cash and cash equivalents of $0. We intend to rely upon loans from our related parties to fund our operations. During the
year ended June 30, 2016, we received advances from Engage Telecom, one of our related parties, to fund our administrative expenses.
However, our related parties are under no obligation to provide such funding. During the nine-month periods ended March 31, 2017
and 2016, the Company received $37,724 and $0, respectively, in advances from a related party. As of March 31, 2017, the balance
of the advances was $696,483.
We expect that we will need to raise
funds in order to effectuate our business plan. We anticipate that we will need to seek financing through means such as borrowings
from institutions or private individuals. There can be no assurance that we will be able to raise such funds. If we are unsuccessful
at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to seek a buyer for our business or
another entity with which we could create a joint venture. If all of these alternatives fail, we expect that we will be required
to seek protection from creditors under applicable bankruptcy laws.
Management anticipates seeking out
a target company through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions
to law firms, accounting firms, investment bankers, financial advisors and similar persons, the use of one or more websites and
similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. Management may engage
in such solicitation directly or may employ one or more other entities to conduct or assist in such solicitation. Management and
its affiliates may pay referral fees to consultants and others who refer target businesses for mergers into public companies in
which management and its affiliates have an interest. Payments are made if a business combination occurs, and may consist of cash
or a portion of the stock in the Company retained by management and its affiliates, or both.
As discussed above, we incurred
a net loss of $50,709 and $75,713, respectively, for the nine months ended March 31, 2017 and 2016. Cash used in operating activities
for the nine months ended March 31, 2017 and 2016 was $37,724 and $0, respectively. Cash used in investing activities for both
the nine months ended March 31, 2017 and 2016 was $0. Cash provided by financing activities for both the nine months ended March
31, 2017 and 2016 was $37,724 and $0, respectively. As of March 31, 2017 and June 30, 2016, we had a stockholders’ deficiency
of $747,777 and $697,068, respectively. Accordingly, there is substantial doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan.
The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Management believes that actions
presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to
continue as a going concern.
Mr. Hua Zhang, the sole director
and officer of the Company, supervises the search for target companies as potential candidates for a business combination. We believe
Mr. Hua Zhang will pay, at his own expense, any costs he incurs in supervising the search for a target company, although he is
under no obligation to do so. Mr. Hua Zhang may enter into agreements with other consultants to assist in locating a target company
and may share stock received by it or cash resulting from the sale of its securities with such other consultants.
Recently Issued Accounting Pronouncements
A variety of proposed or otherwise
potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due
to the tentative and preliminary nature of those proposed standards, we have not determined whether implementation of such proposed
standards would be material to our financial statements.
Off Balance Sheet Items
Under SEC regulations, we are required
to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual
arrangement to which any entity that is not consolidated with us is a party, under which we have:
|
●
|
any obligation under certain guarantee contracts,
|
|
|
|
|
●
|
any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,
|
|
|
|
|
●
|
any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholders’ deficiency in our statement of financial position, and
|
|
|
|
|
●
|
any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.
|
We do not have any off-balance sheet
arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into
operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial
statements in accordance with generally accepted accounting principles in the United States.
Contractual Obligations
None.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Actual results could differ from those estimates.
Revenue Recognition
In general, the Company records
revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably assured. The following reflects specific criteria
for the various revenues streams of the Company:
Revenue for services is recorded at the time the services
are complete.
Where the Company has entered into
a revenue sharing agreement with a third party, the Company will record its’ proportionate share of the revenue.
The Company’s revenues have
principally been from video distribution and advertising fees via the platform. However, since July 1, 2015 until the date of this
report, the Company did not report any revenues.
Accounts Receivable and Allowance
for Doubtful Accounts
Accounts receivable are reported
at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts
based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes
off accounts receivable against the allowance when a balance is determined to be uncollectible.
Property, Plant and Equipment
Property, plant and equipment are
recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, including capitalized
interest during the construction period, and any expenditures that substantially increase the assets value or extends the useful
life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated
over the periods benefited. Maintenance and repairs are generally expensed as incurred.
Intangible Assets and Long Lived
Assets
The Company reviews for impairment
its long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected
to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company’s finite lived
intangibles, comprised of patents, a mobile platform, and web and domain assets, are being amortized over a period of three years.
Stock-Based Compensation
The Company records the cost resulting
from all share-based transactions in the financial statements. The Company applies a fair-value-based measurement
in accounting for share-based payment transactions with employees and when the company acquires goods or services from
non-employees in share-based payment transactions.
Going Concern
The accompanying unaudited condensed
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity
of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the accompanying
unaudited condensed financial statements, the Company had an accumulated deficit of $6,730,844 and a working capital deficit of
approximately $748,000 at March 31, 2017, and has incurred losses for all periods presented. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern
is dependent on the Company’s ability to raise additional capital and implement its business plan, which is now to seek,
investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents
an opportunity for our stockholders. The financial statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. Management intends to provide the Company with additional loans as needed and is seeking
a merger target to implement its strategic plans. Management feels these actions provide the opportunity for the Company to continue
as a going concern.